What is the TRID Rule?

trid rule

Buying a home is a multifaceted process, often involving a learning curve, particularly for first-time buyers when financing with a mortgage. Among the many terms and regulations, TRID can impact your home-buying journey. In this article, we’ll provide an overview of the TRID rule, its origins, accomplishments, and implications for borrowers looking to secure a mortgage.

The Origins and Purpose of the TRID Rule

TRID stands for TILA-RESPA Integrated Disclosures, a rule implemented by the Consumer Financial Protection Bureau (CFPB) in 2015. It consolidates the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single set of regulations.

TILA requires lenders to provide clear information about loan costs and terms. At the same time, RESPA covers the costs and procedures related to real estate transactions, including closing costs and escrow management. By merging these two acts, TRID aims to simplify and clarify the mortgage process for borrowers and lenders.

The goal of TRID is encapsulated in its alternative name, "Know Before You Owe" (KBYO); this initiative is designed to ensure that borrowers are fully informed about the costs and terms of their mortgage, thus preventing predatory lending practices and enabling more educated financial decisions.

Key TRID Disclosures: Loan Estimate and Closing Disclosure

    Under TRID, borrowers must receive two key disclosure documents: the Loan Estimate and the Closing Disclosure.

  • The Loan Estimate: This document provides a comprehensive overview of your mortgage, including the total loan amount, product type (fixed-rate vs. adjustable-rate), interest rate, loan term, monthly payments (principal, interest, and mortgage insurance if applicable), prepayment penalties, and closing costs. Lenders must provide the Loan Estimate within three days of receiving your mortgage application. This lets you compare offers from different lenders and helps you find the best terms for your financial situation.
  • The Closing Disclosure: Once you select a lender and finalize the loan details, you will receive the Closing Disclosure, which outlines the final terms of your mortgage. This document should closely mirror the Loan Estimate, highlighting any changes. TRID mandates that lenders provide the Closing Disclosure at least three business days before the closing date, giving you ample time to review the terms to ensure no discrepancies or unexpected costs.

How TRID Benefits Homebuyers

TRID is a consumer protection law designed to make the mortgage process more transparent and straightforward. Prior to TRID, borrowers had to navigate multiple disclosures, including the truth-in-lending statement, the good faith estimate, and the HUD-1 statement. TRID consolidates all this information into the Loan Estimate and the Closing Disclosure, making it easier for borrowers to understand and compare their mortgage options.

TRID prohibits lenders from charging an application fee before providing the Loan Estimate; this allows you to shop for the best mortgage rates and terms without incurring significant upfront costs. However, while lenders cannot charge for the application, other fees, such as those for processing and credit pulls, may still apply, so it’s important to scrutinize these costs when comparing offers.

Work closely with your mortgage loan officer to ensure you receive and understand the required disclosures. Keep a checklist of the documents needed for a mortgage, such as tax returns, pay stubs, bank statements, and proof of homeowners insurance, to streamline the application process.

proborrower simplifies the home buying process by providing online tools that allow borrowers to shop around and communicate with different lenders to find the best rates for their needs.


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